Vancouver, BC -- April 30, 2018 -- /D.M.O. Newswire/ -- Naturally Splendid Enterprises Ltd. ("Naturally Splendid", "NSE" or "the Company") (TSXV:NSP) (OTC:NSPDF) (FRA:50N) announces its financial results for the year ended December 31, 2017. All amounts are in Canadian dollars and are prepared in accordance with International Financial Reporting Standards.
Naturally Splendid recorded sales of $1,773,327 during the year ended December 31, 2017, compared to $7,346,746 in 2016. This revenue decrease was due to significantly lower sales of bulk hemp seed to South Korea. 2016 retail sales were steady and online sales were higher. In 2016, the Company initiated sales of bulk hemp seed to South Korea at a strong pace, peaking in Q2 and reducing during the second half of 2016 due to limitations at the Company's contracted processor and due to south Korean market factors. During 2017, the international bulk hemp seed sales market was highly price competitive and margins continued to contract in several regions. The Company wrote down its inventory value by $348,690 in 2017 to reflect the lower international prices on bulk hemp seeds and other factors.
Cost of Sales during the year ended December 31, 2017 was $1,509,408, compared to $6,112,175 in 2016. The Company significantly changed its sales mix in 2017 with a reduction of over $5 million of export bulk hemp seed sales, which, since the second quarter of 2016, have been generally sold at a lower gross margin percentage. Profit margins on bulk hemp seed sales continued to trend lower in 2017 due to an increasingly competitive market. Gross profits during the year ended December 31, 2017 was $263,919 (14.88% of sales) compared to $1,234,571 (16.8%) in 2016 due to higher margins on bulk export sales. In 2017, the Company was focused on expanding its retail markets and products and new commercial opportunities as hemp and marijuana regulations continue to evolve in many parts of the world. New products are expected to be launched both domestically and in new international markets.
The Company acquired Prosnack Natural Foods Inc. ("Prosnack") on October 18, 2017. Prosnack generated revenues of $102,944 and a net loss of $126,087. The Company also repaid long-term debt of $178,783 subsequent to the acquisition of Prosnack.
In Canada, the Company has focused on retail sales with both independent and major retailers. Sales have steadily increased in the number of stores and in-store sales since March 2017. For example, the NATERA(R) brand is now present in over 60 major retail locations in BC and Alberta. Naturally Splendid intends to focus on expanding Canadian and USA business opportunities for both the NSE and Prosnack product lines by leveraging the Prosnack client base currently of over 1,400 stores across North America.
Internationally, market trends and pricing have demonstrated severe margin reductions and an over supply of bulk hemp seeds in South Korea. We will continue to maintain relationships with our distributors as this mature market includes consumer demand in other hemp-based products. In the German market, the Company will continue efforts to increase sales of its NATERA(R) product line via the Naturally Splendid ecommerce platform. Advertising and promotional activities are being developed to build more awareness and generate sales opportunities in this market. Naturally Splendid has invested a year of research and due diligence to gain access to the Japanese cannabidiol ("CBD") market. This vital and necessary process cannot be circumvented in order to have orderly and lawful approval of our products. By persevering, the Company hopes to secure a sales base and access to this lucrative market. In Australia, the Company has developed a relationship with a major distributor that has access to three key market segments; Retail, Food Service and Health Practitioners. The Company has launched its NATERA(R) brand in Australia and plans are being made to introduce the Elevate Me(TM) brand of products there as well. It is anticipated that Australia will replace some of the lost sales in South Korea. The revised export strategy focuses on establishing the NATERA(R) and Elevate Me(TM) brands with inherently improved margins over non-branded bulk hemp sales. Non-branded bulk hemp seed sales historically have smaller margins and less processor loyalty than with branded products. It is believed that hemp products will be legally permitted to enter New Zealand by July 2018 and Naturally Splendid is developing relationships to synergize logistics and introduce the NATERA(R) brand to that country. Additionally, the Company is currently reviewing several European opportunities for hemp foods, nutraceuticals as well as cannabinoid extracts.
Naturally Splendid CEO Douglas Mason states, "I am pleased to provide an overview of my first quarter as CEO. I have met with our directors, senior managers, and advisors to review the business in 2017 and evaluate the projects and opportunities in front of the Company in 2018 and beyond. From those meetings, several areas that could benefit from proactive measures were identified and actions were established to reach those initiatives. Our objective is to maximize the Company's assets to best leverage the opportunities as new hemp and marijuana regulations are on the horizon in Canada. In fact, industrial hemp and marijuana regulations are gaining positive momentum in many parts of the world as witnessed with the revised industrial hemp regulations in Australia and evolving marijuana regulations in many parts of Europe, Asia and South America. In this regard, we took action by selling our ownership in POS BPC, we are applying for a Dealer License from Health Canada for the purpose of cannabinoid extraction and related services, as well recently purchased Canada's only organic specific hemp processing facility to ensure a consistent flow of product to our clients whether through our many house brands, or for our private label clients.
Our strategic plan balances domestic and international markets; strengthening our vertical integration through acquisitions such as the recent purchase of a hemp processing facility; as well as plans to develop a cannabinoid extraction facility upon successful application and receipt of a Dealer License from Health Canada. A Dealer License allows the Company to explore and develop a number of business activities including cannabinoid extraction opportunities in North America and internationally. This has the potential to expand our revenue streams dramatically with additional product development and a wide range of services Naturally Splendid may provide under a Dealer License.
Combined, our retail lines are in approximately 1,500 retail outlets in Canada. Prosnack and Naturally Splendid have earned a solid reputation with brokers, distributors and retailers and we are looking to expand that reach. We have empowered the product development team at Naturally Splendid to leverage our unique and proprietary technologies to create additional business opportunities utilizing our recently acquired and expanding operations. And we have also strengthened our financial aptitude with the appointment of a new Chief Financial Officer (CFO) as more sophisticated financial modeling will be required for maximum success. 2017 was very much a transitional year as the Company evolved from a bulk exporter, to more of a vertically integrated business model. The Company is positioned to access traditional food and nutrition markets for both human and pet, as well as have access to the rapidly evolving hemp and marijuana markets.
We look forward to maximizing shareholder value as Naturally Splendid is positioning to evolve from primarily an industrial hemp company into a more opportunistic company that embraces all of Cannabis Sativa."
Naturally Splendid's financial statements can be viewed at: www.sedar.com
About Naturally Splendid Enterprises Ltd.
Naturally Splendid is a biotechnology and consumer products company that is developing, producing, commercializing, and licensing an entirely new generation of plant-derived, bioactive ingredients, nutrient dense foods, and related products. Naturally Splendid is building an expanding portfolio of patents (issued and pending) and proprietary intellectual property focused on the commercial uses of industrial hemp and non-psychoactive cannabinoid compounds in a broad spectrum of applications.
Information set forth in this news release contains forward-looking statements that are based on assumptions as of the date of this news release. These statements reflect management's current estimates, beliefs, intentions and expectations. They are not guarantees of future performance. Naturally Splendid cautions that all forward looking statements are inherently uncertain and that actual performance may be affected by a number of material factors, many of which are beyond Naturally Splendid's control including, Naturally Splendid's ability to compete with large food and beverage companies; sales of any potential products developed will be profitable; sales of shelled hemp seed will continue at existing rates or increase; the ability to complete the sales of all bulk hemp seed purchase orders; and the risk that any of the potential applications may not receive all required regulatory or legal approval. Accordingly, actual and future events, conditions and results may differ materially from the estimates, beliefs, intentions and expectations expressed or implied in the forward-looking information. Except as required under applicable securities legislation, Naturally Splendid undertakes no obligation to publicly update or revise forward-looking information.
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